In this article, we will take a look at two brilliant income shares currently trading at dirt-cheap valuations.
I’m taking the opportunity to once again look at a couple of dividend stars that could make you a fortune in the years ahead.
Tritax Big Box
As the internet shopping phenomenon grows and grows, FTSE 250 storage specialist Tritax Big Box is shaping up nicely to ride this trend.
The business specializes in providing hulking-great spaces connected to major road networks to allow retailers and fast-moving consumer goods giants to get their products to market, and it remains hot on the acquisition trail to build its network of warehouses. In June it announced a £120.7 million plan to buy and develop a new logistics fulfillment center in Darlington in the north of England with the intention of letting it to “a financially robust world leading retailer.”
At the moment City forecasters expect Tritax Big Box, supported by a predicted 12% profits advance, to lift the full-year dividend to 6.7p per share this year from 6.4p in 2017. And the good news continues with estimates of a 7p reward in 2019, assisted by an expected 7% earnings rise.
This means that yields for this year and next stand at a rather-chunky 4.3% and 4.5% respectively. It may trade on a conventionally-high forward P/E ratio of 21.8 times, but in my opinion its excellent profits outlook makes it worthy of such a cost. Anyway, those great dividend yields help to take the sting out of Tritax Big Box’s premium rating.
RSA Insurance Group
Trading may have been more difficult for RSA Insurance more recently, but I remain convinced by the FTSE 100 company’s long-term investment prospects.
The insurance colossus advised in recent days that, owing to abnormal storm activity in Canada, the U.K. and Ireland during the first half of 2018, that weather-related costs boomed to £155 million. This in turn forced operating profit to drop 15% year-on-year to £304 million.
However, these strong winds were not enough to blow RSA Insurance’s belief in its growth strategy off course, and the business elected to lift the interim dividend 11% to 7.3p per share.
The company’s strong balance sheet certainly gives it confidence to lift payouts even when earnings performance disappoints, and so this proved the case during January-June — its solvency II coverage ratio (after dividend accrual) rose to 169%, up 60 basis points from the same point in 2017 and giving it the confidence to raise the midpoint dividend. Indeed, RSA’s brilliant capital position has led to speculation that special dividends or share buybacks could be just around the corner.
At least for now City analysts are suggestive of a 27.4p per share dividend in 2018, up from 19.6p last year and supported by an estimated 9% earnings rise. With profits expected to jump an extra 12% in 2019, RSA Insurance is expected to pay a 33.7p dividend.
Such payout projections yield a mammoth 4.3% and 5.3% respectively. And these, combined with a low, low forward P/E multiple of 14.3 times, makes the insurer a terrific value buy today.
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